If a venture has a return on assets ROA) = 10%, an equity multiplier based on beginning equity = 3.5 times, and a retention rate = 50%, the sustainable growth rate would be:
A) 10%
B) 17.5%
C) 35%
D) 40%
E) 20.5%

Question

Quizplus · Accepted Answer

The sustainable growth rate (SGR) is calculated using the formula: SGR = ROA * Equity Multiplier * Retention Rate. Here, SGR = 10% * 3.5 * 50% = 17.5%.

If a Venture Has a Return on Assets ROA) =